Following recent insolvency figures announcing a rise in company insolvencies, Business Debtline, the free, independent advice service for small and micro businesses, is warning that there are many thousands more small businesses across the UK struggling with their debts.

Last year Business Debtline spoke to a record number of small business owners and directors. In all, Business Debtline advisers answered nearly 38,000 calls – a highest number in the service’s history – from 26,000 small businesses, of which 6,181 had debts of over £50,000.

Nicola Connop spokesperson for Business Debtline said: “Our team of advisers speak to thousands of struggling small businesses every month. Many of these businesses have been hit by the tough economic climate, with lots of callers pointing to trade shortfalls, late payers and supplier issues as the reason for their difficulties. It is clear to us that the difficulties faced by small businesses extend far beyond the insolvency figures announced today.

“Whilst insolvency can seem like a daunting process, there are occasions where it will be the best option, both financially as an individual, and also with a view to trading again in the future. Business Debtline can help small businesses identify when insolvency might be a sensible move. Where it isn’t the right option, we can help small businesses get back on their feet.”

Business Debtline is open 9am – 5:30pm Monday to Friday. Call 0800 197 6062 for free, independent and confidential advice.

The latest figures from Experian reveal that during the final quarter of 2011 the payment performance of UK firms saw a small but positive improvement from 26.17 days in Q3 2011 to 25.97 days, with the biggest improvements coming from the largest firms.

Firms with 101 to 500 employees paid their invoices three quarters of a day faster than in the previous quarter (from 25.84 days to 25.07 days), while firms with more than 501 employees improved by two thirds of a day (from 34.77 days to 34.12 days).

These businesses also led the way in improvements when compared to their payment performance in Q4 2010. Firms with more than 501 employees settled their invoices almost two days faster while firms with 101 to 500 employees improved by almost three quarters of a day – from 36.06 days and 25.79 days in Q4 2010, respectively.

Jason Mills, head of payment performance at Experian UK & Ireland, said: “Payment performance is the timeliest indicator of the current health of any business, so the overall improvement suggests that during the last three months of 2011, pressure on cash flow and finances was more manageable for most businesses.

“Feedback from our larger customers demonstrates awareness and understanding of the struggles faced by some of their key SME suppliers so are prioritising payments to them, to better support them.

“The only firms to see an increase in their payment performance from Q3 to Q4 were firms with three to five employees. The increase, however, was very small and is a timely reminder for smaller firms to credit check potential new and current business customers for signs of possible non-payment before it is too late.”

There has been a slowdown in the rate of recovery in the Scottish economy, according to the latest Lloyds TSB Scotland Business Monitor.

For the three months ending November 2011, results showed that just under a third (30 per cent) of firms surveyed increased turnover, 37 per cent experienced static turnover, while a third (33 per cent) experienced a decrease. This gave a net balance of minus three per cent; a very slight deterioration from the zero per cent of the previous quarter and the zero per cent of the same quarter one year ago.

This latest Business Monitor shows a slight deterioration and a slowdown in the rate of recovery. A return to recession is not indicated but expectations for the next six months have dropped.

The overall net balance for turnover for firms in the production sector in the three months to end November this year was plus nine per cent. This is better than the zero per cent of the previous quarter and significantly improved on the minus one per cent of the same quarter one year ago.

Service businesses have not experienced such benign conditions with the overall net balance for turnover for the three months ending November at minus eight per cent – well down on the zero per cent of the previous quarter and the plus two per cent of the same quarter one year ago.

Volumes of repeat business showed a deterioration from the previous quarter with the net balance on volume of repeat business at minus six per cent this quarter compared to minus one per cent in the previous quarter and similar to the minus seven per cent of the same quarter one year ago. The trend in the volume of new business is similar. An overall net balance of minus seven per cent was recorded compared to the minus three per cent of the previous quarter and the minus one per cent of the same quarter one year ago.

Export activity has plunged. In the latest three months the net balance of export activity was  minus 17 per cent – a significant fall from the plus 10 per cent of the previous quarter and a much worse level than the plus two per cent of the same quarter one year ago. Export activity appears to have been severely affected by the global slowdown and the sovereign debt crisis in the Eurozone economies.

Donald MacRae, chief economist, Lloyds TSB Scotland said: “This latest Business Monitor suggests the already muted recovery in the Scottish economy has stalled. Subdued domestic demand coupled with the global slowdown has hit both services and manufacturing sectors. There is no definite sign of a lapse into a “double dip” but every indication of an already slow recovery slowing further to the point where growth is negligible or non-existent. In the face of slowing global demand, falling business and consumer confidence in the UK and cuts in government spending, the Scottish economy is struggling to maintain growth and momentum. A more vigorous recovery awaits an uplift in both consumer and business confidence.”

73 per cent of the UK’s SMEs are concerned that cautious consumer spending this Christmas will have a negative impact on their business, according to research conducted by payment processing firm Streamline.

The research surveyed small business owners to find out what they expected from the Christmas period in terms of sales and their customers expectations. The results show that:

• 89 per cent predict that difficulty managing their finances will be a major concern for shoppers in the holiday period
• 83 per cent expect their customers will have to rely on credit cards for purchasing

Despite this expectation around card payment preference, less than half (48 per cent) of those surveyed currently accept cards and 76 per cent think that shoppers will be frustrated if they’re not able to pay by this method. In order to meet this demand and start to compete in this sector, a fifth (20 per cent) of those surveyed will look to start offering customers the ability to pay by card in the next six months.

Small business owners are also feeling increasingly pressured by their competitors coupled with it becoming increasingly challenging to capitalise on consumer spending, as demonstrated by the following findings:

• 77 per cent of those surveyed predicting greater levels of competition this Christmas
• 86 per cent of respondents predict that shoppers will go online to avoid crowds this festive season
• As a result, despite 42 per cent of those surveyed not currently trading online, 32 per cent are making plans to trade online in the future.

Jayadeep Nair, VP small business for Streamline commented: “Christmas is always seen as a profitable time of year but with recent reports of a double dip recession, it’s no surprise that many small business owners have concerns about their customers’ willingness to spend this holiday season. However, Christmas can still offer many opportunities, small businesses just need to adapt. Offering consumers preferred methods of payment, competitive pricing, increased promotional spend and a good atmosphere can all help to drive sales. Those business owners who are looking to expand their services next year, whether that is online or offering card payment facilities, are all moving in the right direction. To be successful small businesses must respond to customer demand.”

Following the credit easing initiatives announced in last week’s Autumn Statement, new research from borro reveals that small business owners have been locked in a capital battle which has resulted in lost opportunities to grow their business. 
Almost a quarter of SME owners (24 per cent) say they have missed out on a growth opportunity due to a lack of accessible finance. One in 10 (11 per cent) small business owners have also said that the inability to raise cash has even made them consider closing their business.

With bank confidence still at an all-time low, small business owners have turned to their personal funds to boost their businesses. Over half (57 per cent) of small business owners have used their personal funds to inject capital into their business and 17 per cent have asked friends and family for additional funds. With over 70 per cent of borro’s customers being small business owners it is not surprising that 16 per cent of SME owners have also used their personal assets to secure finance over the past 12 months.

Two thirds (66 per cent) of small and medium sized business owners  lack confidence in their bank, and are unsure of whether their bank will lend to them. As a result only one in five (19 per cent) of SMEs have attempted to secure bank finance for their business in the past year and only a third (31 per cent) of this group have been successful in securing the finance in full.

Over two thirds (67 per cent) of small to medium sized business owners believe that banks should relax their lending criteria as those seeking finance are denied due to credit checks and not fitting the lenders profile.

Paul Aitken, CEO of borro, commented: “A dramatic shift is needed for smaller business owners to feel they can gain access to much needed finance. While some of the initiatives introduced by the Government may ease the capital battle that has taken place over the past year; there is still a demand for small business owners to access finance quickly. This may be to ensure the business is able to take advantage of growth opportunities or address cash flow problems before they escalate. Our research demonstrates that this demand is not being met by banks and other traditional lenders.”